Develop a Better Business Model Faster by Analyzing Past Performance as Though These Were New Tests

A well-known epigram says that "Those who ignore the past are doomed to repeat its mistakes." No one wants to do that.

However, finding lessons from a company's past is becoming harder and harder to do. Fearing law suits and wanting to save on storage space and costs, many companies frequently trash all of their older records. We all know that success has many parents while failure is an orphan. So discussing corporate history is often of little use. What can a leader do to unearth and reconstruct the past lessons?

The typical solution among the most effective business-model-innovating leaders was to perform something that is best described as corporate archeology. Archeologists go out to find what remains of the past. After carefully observing what they can locate (which is usually a tiny fraction of what originally existed), they begin to draw lessons from the materials they observe.

If bone tools are present and bone pieces appear to have been smashed in the same location, an archeologist may hypothesize that the site was used at one time by a bone tool maker. Carbon dating can tell how long ago this occurred. The archeologist can go on to create modern duplicates of the tools and try to use those duplicates in various ways, in order to make hypotheses about what the tools were used for in the past. The archeologist may go one step further and look at the bone implements still used today by people living in less industrialized cultures for possible clues.

Company leaders seem to do something very similar to what the archeologist pursues. In their search, the business leaders are usually looking for the most extreme forms of success and setbacks. Having found these results, they then go back to sift through what happened to locate what was different about the successes and setbacks from the company's usual experiences.

Pioneer discount broker Charles Schwab early on noticed that many of the company's telephone calls were to find out if financial securities were purchased yet and, if so, at what price. Realizing that this behavior meant that customers probably always wanted this kind of information, the company began automatically calling customers after every trade was executed to share the details. Many customers complimented Schwab for providing this service.

That success stayed clear in the organizational memory. When the Internet became important, Schwab was among the leaders in developing this way of communicating to make it easier for customers to find out about their accounts, positions, and trades. From these insights concerning problems and successes, Schwab became the leading on-line broker.

Tellabs founder and chairman Michael J. Birck has noted that you have to keep testing your successes for their future relevance. When the telecommunications equipment provider was launched, Tellabs had to succeed with the regional Bell operating companies or not survive. Succeeding meant thinking and acting just like Bell Labs had done in the past, and being conservative in adding equipment to the established network.

Meanwhile, telecommunications networks are increasingly being provided by agile companies like QWEST, Williams, and Frontier which want to establish new technical models and ways of operating. Tellabs needed a variable organizational structure and technology focus to match the needs of these two different kinds of customers.

What can you learn from corporate archeology in building a better business model for today . . . and tomorrow?

Copyright 2008 Donald W. Mitchell, All Rights Reserved